Americas

Retail Webcast Recap: 16 Trends to Watch in 2016

I don’t think there is any other commercial real estate sector that has more question marks out there than Retail. Last week in my 16 Retail Trends to Watch in 2016 I discussed some of the bigger picture trends related to retail and below are some key highlights. You can learn much deeper insight about each of these topics by tuning in to hear a free recording of the webcast:

And here are just some of the great questions from our Q&A segment, with my responses:

Q: What are your expectations for cap rates for retail product in 2016?GB: There’s been a strong trend of cap rate compression the last few years. For trophy and Class A product and premier centers in any given marketplace cap rate compression should continue. For value-add or Class B/C space or shopping centers in tertiary markets, maybe not so much. I don’t see pricing going backward certainly, but supply won’t be as constricted so for weaker product cap rate compression will probably be curbed.

Q: Do you think there will be more retail bankruptcies in the year ahead?
GB: So we tracked about 25 bankruptcies last year and 25 the year before that. If we go back to 2008, 2009 and 2010, it was averaging 30 to 35 per year. I think it will tick-up a little bit this year but I also don’t think there will be an awful lot of huge names out there. On the whole, if we had 25 major bankruptcies last year, we’re probably looking at 25-30 year this year.

Q: Why is e-commerce going bricks and mortar?
GB: Not having a physical store in a certain area does not mean everyone goes online. In fact, it could lower a retailer’s online presence. There is a growing knowledge in the marketplace that to get maximum sales, retailers (through omni-channel) find that online presence works hand-in-hand with bricks-and-mortar and they each boost sales for one another. The trick is getting the balance right. 2016 will be the year of the big e-commerce surge.

Q: Which of the trends discussed apply to Europe as well.
GB: Yikes, I’ll pass on that. I’ll refer to my colleagues across the pond on that one. My expertise is in the Americas. Certainly, there’s a much more challenged economy there, but I’ll have to pass on that one.

Q: What impact do you see foreign investment having on retail investment in 2016?GB: Huge, huge driver. Remember, we’re talking about investors coming to this market and their expectations for yields are different. Buyers are looking for safe havens to place their money. In a lot of ways, especially in a supply constricted marketplace as in the last couple years has really driven prices up. I think the trend of foreign investment continues if not accelerates this year, and we’ll finally see an increase in the selection of properties they have to choose from.

Again, to listen to the full webcast and complete Q&A session, click here. If you have additional questions or comments, feel free to contact me.

Garrick serves as Vice President of Retail Research for the Americas. He speaks frequently at industry events and has been a keynote speaker at symposiums, conferences and market forecasting events for groups like the Appraisal Institute, Urban Land Institute, CREW, ICSC and PRSM. He is also a member of Lambda Alpha International, an invitation-only land use society for those who are involved in the ownership, management, regulation and conservation of land, but also those who are involved in its development, redevelopment and preservation.